The recommendations and opinions expressed in this

Canaccord Canaccord Canaccord Canaccord GenuityGenuityGenuityGenuity is the global capital markets group of C is the global capital markets group of C is the global capital markets group of C is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : anaccord Financial Inc. (CF : TSX | CF. : anaccord Financial Inc. (CF : TSX | CF. : anaccord Financial Inc. (CF : TSX | CF. : LSELSELSELSE))))

The recommendations and opinions expressed in this The recommendations and opinions expressed in this The recommendations and opinions expressed in this The recommendations and opinions expressed in this rrrresearchesearchesearchesearch report report report report accurately reflect the Investment Analyst’s personal, independent and accurately reflect the Investment Analyst’s personal, independent and accurately reflect the Investment Analyst’s personal, independent and accurately reflect the Investment Analyst’s personal, independent and objective views about any and all the Designated Investments and Relevanobjective views about any and all the Designated Investments and Relevanobjective views about any and all the Designated Investments and Relevanobjective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important information, please see the t Issuers discussed herein. For important information, please see the t Issuers discussed herein. For important information, please see the t Issuers discussed herein. For important information, please see the Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s Online Disclosure Online Disclosure Online Disclosure Online Disclosure DatabaseDatabaseDatabaseDatabase....

Further information on the methodologies used to derive our target prices, and the risks that could impede achievement of these Further information on the methodologies used to derive our target prices, and the risks that could impede achievement of these Further information on the methodologies used to derive our target prices, and the risks that could impede achievement of these Further information on the methodologies used to derive our target prices, and the risks that could impede achievement of these targets, is available upon request.targets, is available upon request.targets, is available upon request.targets, is available upon request.

NORTH AMERICAN PORTFOLIO STRATEGY North American Portfolio Strategy: Fertilizers (Overweight): Beyond the Drought, Tightening Stocks Indicate Another Global Demand Cycle May be Around the Corner METALS AND MINING Bear Creek Mining Corp. (BCM : TSX-V): Corani project and exploration update; maintain SPECULATIVE BUY and C$5.75 target price ENERGY PDC Energy (PDCE : NASDAQ): Initial horizontal Codell test competitive with Niobrara wells; target to $36 Pioneer Natural Resources (PXD : NYSE): Impressive Wolfcamp well performance; joint venture would bring value forward; target lowered to $117 EQT (EQT : NYSE): Competitive Marcellus wells; robust cap structure post MLP TECHNOLOGY Avago Technologies Limited (AVGO : NASDAQ): Very strong wireless guidance offset by softer trends in other three divisions; reiterate BUY and increase target to $43 Marvell Technology Group (MRVL : NASDAQ): Widely expected miss: buy ahead of bottoming PCs, increasing dividend; maintain BUY, lower target to $15 QUALCOMM (QCOM : NASDAQ): Meetings indicate strong QTL ASP trends, potential for improved QCT margins TELECOMMUNICATIONS 21Vianet Group (VNET : NASDAQ): Q2/12 first look: in line results, capacity expansion ahead of expectations CONSUMER AND RETAIL Gap (GPS : NYSE): Operating expense pressure to persist in H2; target to $28 TRANSPORTATION AND INDUSTRIALS WestJet Airlines Ltd. (WJA : TSX): Correcting annual estimates; maintaining BUY rating and C$27.00 target Continued on next page

17 August 201217 August 201217 August 201217 August 2012

USUSUSUS Economic Indicators Economic Indicators Economic Indicators Economic Indicators TimeTimeTimeTime ConsConsConsCons.... U. of Michigan Confidence – Aug P 09:55 72.30 Leading Indicators - Jul 10:00 0.20% Canadian Economic IndicatorsCanadian Economic IndicatorsCanadian Economic IndicatorsCanadian Economic Indicators Consumer Price Index MoM - Jul 08:30 0.20% Consumer Price Index YoY - Jul 08:30 1.60% Bank Canada CPI Core MoM - Jul 08:30 0.20% Bank Canada CPI Core YoY - Jul 08:30 2.00% Consumer Price Index SA MoM - Jul 08:30 0.10% Core CPI SA MoM - Jul 08:30 0.20% Consumer Price Index - Jul 08:30 - -

Equity IndicesEquity IndicesEquity IndicesEquity Indices Ch.Ch.Ch.Ch. LevelLevelLevelLevel S&P/TSX +109.70(+0.92%) 12,015.14 Dow Jones +90.02 (+0.68%) 13,254.80 NASDAQ +34.56 (+1.14%) 3,065.49 S&P 500 +10.90 (+0.78%) 1,416.43

CommoditiesCommoditiesCommoditiesCommodities Ch.Ch.Ch.Ch. LeveLeveLeveLevellll Gold (US$/oz) +$12.40 $1,616.10 Copper (US$/lb) +$0.03 $3.39 WTI Oil (US$/bbl) +$0.80 $95.13

Recently PublishedRecently PublishedRecently PublishedRecently Published

SodaStream International – Intrigued by Bubbling Opportunities; Initiating With a HOLD Rating and a US$45.00 Target Price Scott Van Winkle, CFA 13 August 2012

RDA Microelectronics – Initiating With a BUY Rating and a US$14.00 Target Price T. Michael Walkley 10 August 2012

Merus Labs International Inc. – Expanding Globally With a Pure Growth Story; Initiating With a BUY Rating and a C$2.90 Target Price Neil Maruoka, MSc, MBA 31 July 2012

Cirrus Logic - Initiating With a BUY Rating and a US$35.00 Target Price Bobby Burleson 30 July 2012

Avago Technologies Limited - Strong IP & Leading Products; Initiating With a BUY Rating and a US$42.00 Target Price T.Michael Walkley 23 July 2012

EXA Corporation - Compelling Technology With Plenty of Headroom; Initiating Coverage With a BUY Rating and a US$13.00 Target Price Richard Davis 23 July 2012

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Daily Letter Summary | 2 17 August 2012

SUSTAINABILITY GT Advanced Technologies (GTAT : NASDAQ): Smart phone opportunity feeling closer: upgrading to BUY on potential de-risking of sapphire backlog; price target to $9 LIFE SCIENCES Perrigo Company (PRGO : NASDAQ): F2013 guidance disappoints; maintain HOLD with $125 price target Perrigo Company (PRGO : NASDAQ): Post FQ4 -- it's hard to come up with a near-term upside thesis St. Jude Medical (STJ : NYSE): FDA is "Johnny come lately" as usual; maintain BUY MAP Pharmaceuticals (MAPP : NASDAQ): Update at Canaccord Genuity Global Growth Conference Life Sciences -- Biomedical Devices and Services: Key diagnostics takeaways from the 32nd Annual Canaccord Genuity Global Growth Conference Life Sciences -- Biomedical Devices and Services: Med-tech: key takeaways from company meetings at our Global Growth Conference


NORTH AMERICAN PORTFOLIO STRATEGY

North American Portfolio Strategy | Martin Roberge, M.Sc, CFA, 1.514.844.3734 • Fertilizers (Overweight): Beyond the Drought, Tightening Stocks Indicate

Another Global Demand Cycle May be Around the Corner

Like in 2002 when the last drought occurred in the US, concerns about the Like in 2002 when the last drought occurred in the US, concerns about the Like in 2002 when the last drought occurred in the US, concerns about the Like in 2002 when the last drought occurred in the US, concerns about the global economy are such that fertilizer stocks have had a muted response to the global economy are such that fertilizer stocks have had a muted response to the global economy are such that fertilizer stocks have had a muted response to the global economy are such that fertilizer stocks have had a muted response to the spike in grain prices. However, the tightening in fertilizer inventories this year spike in grain prices. However, the tightening in fertilizer inventories this year spike in grain prices. However, the tightening in fertilizer inventories this year spike in grain prices. However, the tightening in fertilizer inventories this year along with talong with talong with talong with the stabilization in export volumes suggest that a firming in fertilizer he stabilization in export volumes suggest that a firming in fertilizer he stabilization in export volumes suggest that a firming in fertilizer he stabilization in export volumes suggest that a firming in fertilizer demand should soon become more visible, allowing for a catchdemand should soon become more visible, allowing for a catchdemand should soon become more visible, allowing for a catchdemand should soon become more visible, allowing for a catch----up to grain up to grain up to grain up to grain prices. prices. prices. prices.

The logic is simple! Why buy fertilizer stocks ahead of an imminent peak in grain prices says the bear. But hold on says the bull, AGU and POT have barely moved, while corn and wheat prices have gone vertical. Stock prices embed too much commodity price risk. But when grain prices roll over, fertilizer stocks should take off and outperform. Who is right/wrong? A closer look at the 1988 and 2002 droughts sheds some light on the potential outcome.

For 1988, 2002, and 2012, Figure 1 Figure 1 Figure 1 Figure 1 shows the price performance of the Canadian fertilizer group relative to the S&P/TSX. We also plot the CRB grain index. Both lines are rebased to 100 at January 1. As one can see, contrary to the 1988 experience when fertilizer stocks’ outperformance matched the increase in grain prices, the current episode resembles more that of 2002. That is, the spike in grain prices has allowed fertilizers to lead the market YTD, but the degree of outperformance is much behind that of the grain rally. Why is that? Investors must remember that in 1988, the global economy was roaring (world real GDP growth of 4.2%), enjoying the reflation impulses that followed the 1987 market crash. But like in 2002 when world real GDP growth was only 2.6%, expectations for 2012 are not much higher and this probably explains why fertilizer stocks have not reacted much to the increase in grain prices. We believe investors are betting that cyclical headwinds will outweigh a temporary spike in grain prices.


This is where we believe the consensus of investors is wrong. That is, we believe fertilizer demand is better than widely perceived. As Figure 2Figure 2Figure 2Figure 2 indicates, despite a strong US$, US exports of agricultural commodities (i.e., ferts) are stabilizing. Second, already below historical average, fertilizer inventories have been tightening lately, meaning that there is some demand out there. The net result is a turnaround in the fertilizer export-to-inventory (EX/I) ratio which suggests that another global demand cycle may be around the corner. Similar turnarounds in the EX/I ratio in 1994, 2000, 2006, and 2010 shortly preceded a phase of outperformance for fertilizer stocks vs. the market. Thus, like in 2002, even if grain prices settle down later this year, we believe the odds are high that investors upgrade their modest EPS growth expectations and valuation multiples on AGU and POT, which should allow the group to lead the S&P/TSX again (Figure 3Figure 3Figure 3Figure 3). Keep buying dips

METALS AND MINING

Bear Creek Mining Corp. | Nicholas Campbell, 1.604.643.7027 BCM : TSX-V : C$2.38 | C$219.3M | Speculative Buy , Target C$5.75 • Corani project and exploration update; maintain SPECULATIVE BUY and

C$5.75 target price

Investment recommendation

We maintain our SPECULATIVE BUY recommendation with a target price of C$5.75 per share, unchanged.

Investment highlights

• BCM is on track to submit the ESIA for the Corani project in September 2012 with the second formal public hearing to be scheduled shortly after submission of the ESIA. Management expects to receive approval of the ESIA by year-end 2013, with the potential for a start of production in 2016. 95% of the required surface titles have been secured with the remainder currently under negotiation.

• The Santa Ana project remains shuttered under the Supreme Decree issued in June 2011. The company continues to work towards a negotiated settlement to resolve the issue and re-start the permitting process. Management is hopeful that a resolution can be achieved by year-end 2012.

Valuation

BCM’s update remains largely in line with our expectations. We estimate that the company should have sufficient cash to support its exploration and permitting activities until major development activities begin, likely in 2014. Our valuation and target price remains unchanged. We estimate a peak gold price NAVPS (10%, spot) of C$8.84, unchanged. We continue to value the shares of Bear Creek Mining based on a 0.65x multiple to our peak silver price estimate of NAVPS.


ENERGY

PDC Energy | John Gerdes, 1.713.331.9443 PDCE : NASDAQ : US$27.70 | US$838.1M | Buy , Target US$36.00 ↓↓↓↓ • Initial horizontal Codell test competitive with Niobrara wells; target to $36


We are lowering our PDCE target price $3 to $36 per share due to 8% lower expected ’12 production and higher operating expense. The production revision is related to elevated Wattenberg field line pressure resulting from third-party midstream facilities issues and poor compressor performance given exceptionally hot summer weather.

Importantly, the lower production outlook is not related to well/reservoir performance, and we reiterate our BUY rating.


• Competitive iCompetitive iCompetitive iCompetitive initial horizontal Codell test:nitial horizontal Codell test:nitial horizontal Codell test:nitial horizontal Codell test: PDCE’s first horizontal Codell test averaged 420 Boepd (~80% liquids) the first 30 days and should recover 300+ Mboe. The company increased activity in the Wattenberg field from one to two rigs and plans to drill 27 horizontal Niobrara and 10 horizontal Codell wells this year.

• Horizontal Niobrara wells tracking earlier results: Horizontal Niobrara wells tracking earlier results: Horizontal Niobrara wells tracking earlier results: Horizontal Niobrara wells tracking earlier results: Horizontal Niobrara wells (~4,000’ lateral, 16 frac stages) continue to average 450 Boepd (~60% oil, ~20% NGLs, ~20% gas) the first 30 days and recover ~350 Mboe for a cost of $4+ million. PDCE is drilling its first stacked lateral pilot (seven Niobrara, five Codell well per section).

• Expect Utica JV, initial drilling results later this year:Expect Utica JV, initial drilling results later this year:Expect Utica JV, initial drilling results later this year:Expect Utica JV, initial drilling results later this year: PDCE has ~45,000 net acres prospective in the Ordovician-age Utica Shale predominately in Noble/Guernsey Counties and eastern Morgan/ northern Washington Counties in Ohio. PDCE’s average leasehold cost is ~$2,000 per acre. PDCE anticipates establishing a JV to develop the play this autumn and plans to operate the venture. The company is testing a vertical Morgan County well and completing the first of two Guernsey County horizontal tests with plans to drill a Morgan or Washington County horizontal test later this year.


Pioneer Natural Resources | John Gerdes, 1.713.331.9443 PXD : NYSE : US$98.35 | US$12,306.6M | Buy , Target US$117.00 ↓↓↓↓ • Impressive Wolfcamp well performance; joint venture would bring value

forward; target lowered to $117


We are lowering our target price $3 to $117 per share due to a lower oil price realization and higher operating expense. Pioneer’s capital productivity is ~10% better than the industry (liquids-normalized). The company’s superior productivity is underpinned by Spraberry field development and associated oilfield service vertical integration.

Yet, PXD trades at a minor premium (’13E EBITDA) to the group though offers ~20% less CFPS growth (’12-’14E). Consequently, PXD presents ~20% less implied upside to our target than the group as investors apply a premium for the company’s drilling inventory depth and potential for further productivity gains in Wolfcamp. Beyond Wolfcamp productivity, a JV targeting the Wolfcamp in the southern 200,000 net acres of the Spraberry field represents potential upside to our target. Recent horizontal Wolfcamp tests in southern Upton/Reagan should recover ~450 Mboe.


• Strong northern Upton County Wolfcamp production history:Strong northern Upton County Wolfcamp production history:Strong northern Upton County Wolfcamp production history:Strong northern Upton County Wolfcamp production history: More than six months of production history suggest Pioneer’s initial two horizontal Wolfcamp tests (5,300’ laterals, 30 frac stages) in northern Upton County should recover ~650 Mboe (90%+ liquids).

• Spraberry field development Spraberry field development Spraberry field development Spraberry field development –––– horizontal or vertical? horizontal or vertical? horizontal or vertical? horizontal or vertical? Assuming Wolfcamp development wells (~7,000 laterals, 30-35 frac stages) evidence some increase in recoveries and cost $7+ million, the capital productivity of horizontal development in the Spraberry field would rival vertical execution (~$10/Boe). Accordingly, given the accelerated recovery profile of horizontal wells, we believe the economic return of horizontal development should exceed vertical development.


EQT | John Gerdes, 1.713.331.9443 EQT : NYSE : US$55.89 | US$8,390.8M | Hold , Target US$57.00 • Competitive Marcellus wells; robust cap structure post MLP

Investment thesis

We reiterate our HOLD rating and maintain our target price at $57 per share following minor model refinements. Our target price is anchored on a $5 long-term NYMEX gas price, which is only modestly higher than the gas price currently reflected in E&P equities.

To illustrate our value challenge, EQT trades at a ~20% premium (‘13E EBITDA) to the group though the CFPS growth (’12-’14) is comparable. Accordingly, we retain our HOLD rating as we believe EQT is fairly valued near current levels (see Valuation section pg. 5).


• Competitive Marcellus gas well productivity: Competitive Marcellus gas well productivity: Competitive Marcellus gas well productivity: Competitive Marcellus gas well productivity: In Greene County, a 10-well pad is commencing production this month at an average initial rate of 10-12 Mmcfpd, implying a recovery of ~6 Bcfe per well for a drill/complete cost of $6+ million. In ’12, EQT is conducting a five-rig program and plans to drill ~130 horizontal Marcellus wells with an average lateral length of ~5,500’. The company has ~20 wells (~400 frac stages) waiting to be turned in line.

• MLP offering:MLP offering:MLP offering:MLP offering: EQT priced 13.375 million common units representing a 40.6% limited partner interest in EQT Midstream Partners, LP (EQM) at $21 per unit. With an anticipated quarterly distribution of $0.35, EQM offers a current yield of 5.2%.

• Capital structure bolstered with MLP: Capital structure bolstered with MLP: Capital structure bolstered with MLP: Capital structure bolstered with MLP: The MLP offering generated almost $300 million of net proceeds to the consolidated entity. Pro forma, EQT currently has ~$800 million of cash on the balance sheet and the projected ’13E year-end revolver draw is nil.


TECHNOLOGY

Avago Technologies Limited | T. Michael Walkley, 612.332.8069 AVGO : NASDAQ : US$36.91 | US$9,036.0M | Buy , Target US$43.00 ↑↑↑↑ • Very strong wireless guidance offset by softer trends in other three divisions;

reiterate BUY and increase target to $43

Investment recommendation: Avago reported strong Q3/F2012 results with mixed Q4/F2012 sales guidance, as very strong wireless guidance was offset by softer guidance in the Wired Infrastructure, Industrial, and Consumer divisions. We believe Avago’s proprietary technologies, strong IP portfolio, and diverse customer base in several strong growth markets positions the company for strong long-term earnings growth. In fact, we believe Avago is well positioned for several secular growth drivers including smartphones with increasing LTE content, industrial growth in emerging markets, and increasing global demand for bandwidth. We reiterate our BUY rating and increase our target to $43.


• Q3/F2012 sales of $606M and pro forma EPS of $0.72 were above our $599M/$0.67 estimates. Stronger Industrial and consumer sales estimates were the main reasons for the upside.

• Guidance for Q4/F2012 sales of $606M-$624M was slightly below our $641M estimate. However, pro forma EPS of roughly $0.71-$0.75 was above our $0.70 estimate. Sequential wireless growth expectation of 20%-30% was well above our 15% estimate, and we believe indicates strong FBAR demand due to improving 28nm industry supply combined with Avago’s likely dollar content share gains in the iPhone 5. Due to expectations for sequential sales declines in Avago’s other three business divisions, we modestly increase our F2012 pro-forma EPS estimate from $2.65 to $2.73 and F2013 from $2.97 to $3.05.

• Please see our July 23 report titled “Strong IP and leading products; initiating Strong IP and leading products; initiating Strong IP and leading products; initiating Strong IP and leading products; initiating with BUY, $42 targwith BUY, $42 targwith BUY, $42 targwith BUY, $42 targetetetet” for details on our basically unchanged positive Avago thesis.

Valuation: Our $43 price target is based on shares trading at roughly 14x our F2013 pro forma EPS estimate.


Marvell Technology Group | Bobby Burleson, 1.415.229.7163 MRVL : NASDAQ : US$12.28 | US$7,203.8M | Buy , Target US$15.00 ↓↓↓↓ • Widely expected miss: buy ahead of bottoming PCs, increasing dividend;

maintain BUY, lower target to $15


We reiterate a BUY rating for MRVL, as we believe soft HDD seasonality telegraphed weak results while firming PC builds should improve sentiment around suppliers into the PC vertical. Recent TD wins and management's implementation of a dividend are additional positives in a tough environment.


• MRVL reported CQ2/12A (Jul) after the close. Revenues and EPS were $816.1 million and $0.24, compared to consensus estimates of $852.7 million and $0.26 and our estimates of $865.0 million and $0.28.

• The company guided CQ3 revenue up 1% at the midpoint ($825 million), well below the consensus view of $914.9 million, with EPS guidance of $0.24 below consensus of $0.31.

• We believe weak guidance was widely expected as management has been upfront with respect to weak data points since their last earnings release, including weak HDD data from key OEMs and a slowdown for TD business in China due to weak consumer demand.

Valuation

MRVL's price target of $15 (was $20) is 10x our C2013 EPS estimate of $1.11 plus net cash of $3.64/share.


QUALCOMM | T. Michael Walkley, 612.332.8069 QCOM : NASDAQ : US$62.57 | US$106,578.0M | Buy , Target US$80.00 • Meetings indicate strong QTL ASP trends, potential for improved QCT margins

Investment recommendation: We hosted a presentation and investor meetings with Qualcomm CFO Bill Keitel at the Canaccord Genuity Global Growth Conference. We believe Qualcomm is well positioned to post strong earnings growth due to stable royalty rates, strong market share for integrated chipsets, and strong 3G device sales in emerging markets. We reiterate our BUY rating and $80 price target.


• With our checks indicating increased penetration of 3G smartphones versus 2G feature phones in emerging markets, Qualcomm reported very strong QTL ASPs in the June quarter and raised its F2012 CDMA device ASP guidance midpoint from $212 to $219. In our meetings, Bill Keitel provided his longer-term view for low single-digit ASP erosion in F2013. This expectation for modest ASP declines off the strong F2012 ASP of $219 is consistent with our expectations, and we believe it positions Qualcomm for strong QTL sales and earnings growth in F2013 as we anticipate strong 3G/4G smartphone growth.

• Despite issuing down sequential QCT sales and margin guidance for the September quarter due to insufficient 28nm supply and product transitions at leading OEM customers, we believe Qualcomm is well positioned for a material recovery in MSM volumes during the December quarter as 28nm supply improves and leading smartphone products launch. Further, we believe QCT operating margins will also sharply improve in the December quarter. In fact, Bill Keitel disclosed Q4/F2012 QCT operating margin guidance of roughly 14% incorporates a roughly 500bp margin adverse impact due to the lower near-term MSM volumes. We maintain our expectation QCT margins should recover back to at least 20% in Q1/F2013 and could potentially recover to higher levels longer term.

Valuation: Our $80 price target is based on shares trading at roughly 18.5x our F2013 pro forma EPS estimate.


TELECOMMUNICATIONS

21Vianet Group | Eric Chu, CFA, 212.389.8129 VNET : NASDAQ : US$10.00 | US$622.0M | Buy , Target US$16.00 • Q2/12 first look: in line results, capacity expansion ahead of expectations


We reiterate our BUY rating on VNET following its Q2/12 report that was highlighted by stronger than expected hosting revenue, largely thanks to higher than expected utilization rate and MRR growth, as well as better than expected growth of self-built capacity. We note that lighter than expected adjusted EBITDA margin was largely due to higher R&D spending as the company invests to strengthen its service offerings for an increasingly diversified customer base.


• Revenue in line, margin impacted by R&DRevenue in line, margin impacted by R&DRevenue in line, margin impacted by R&DRevenue in line, margin impacted by R&D – Total revenue of RMB364.5m was essentially in line with both our estimate and consensus of RMB365m. Although adj. EBITDA was impacted by higher than expected R&D expense, we note that MRR/cab growth (+18.3%y/y vs. 14.1%), utilization rate (81.2% vs. 76.5%) and self-built capacity growth (2,280 vs. 2,000) all came in better than expected.

• SelfSelfSelfSelf----built capacity expansion ahead of expectationsbuilt capacity expansion ahead of expectationsbuilt capacity expansion ahead of expectationsbuilt capacity expansion ahead of expectations – With higher than expected self-built capacity growth in the quarter and continued strong demand for quality data center space in China, we believe the company has largely overcome the capacity constraint and is well positioned to witness an acceleration in revenue growth in H2/12 and beyond.

• Q3/12 outlook in line with consensusQ3/12 outlook in line with consensusQ3/12 outlook in line with consensusQ3/12 outlook in line with consensus – With the Q2/12 report, the company also provided a revenue and adj. EBITDA outlook for Q3/12 that is in line with consensus expectations. We believe there is likely some level of conservatism built in the Q3/12 guidance.

Valuation

Our price target of $16 is based on 11.0x 2013E adjusted EBITDA.


CONSUMER AND RETAIL

Gap | Laura Champine, CFA, 212.389.8056 GPS : NYSE : US$34.34 | US$16,860.9M | Sell , Target US$28.00 ↑↑↑↑ • Operating expense pressure to persist in H2; target to $28


GPS reported EPS of $0.49, $0.02 above our estimate and $0.01 ahead of consensus and the high end of prior guidance. The company benefited from a 295bps yr./yr. gross margin improvement, better than our estimate of a 100bps increase. GPS is progressing through what management has labeled an investment year, which resulted in a 95bps increase in the operating expense rate driven primarily by elevated marketing spending. We had forecast 50bps of expense leverage. We continue to believe shares have been overbought with the stock appreciating 85% YTD versus the S&P 500 index +13% and the RLX index +22%. We still have concerns regarding H2 margins, particularly heading into the back-to-school and holiday seasons. Shares currently trade at 14x our FY13 EPS estimate and 7x FY13E EV/EBITDA. We believe a P/E multiple of 12x is more appropriate for a mature retailer.


• Higher operating expenses reduce our FY12 EPS estimate by $0.03 to $2.11.Higher operating expenses reduce our FY12 EPS estimate by $0.03 to $2.11.Higher operating expenses reduce our FY12 EPS estimate by $0.03 to $2.11.Higher operating expenses reduce our FY12 EPS estimate by $0.03 to $2.11. We expect a 60bps increase in the op-ex rate in H2, up from our prior forecast of no change. GPS raised FY12 EPS guidance by $0.17 at the midpoint to $1.95-$2.00. We view this as conservative, and prior consensus was $0.08 above the high end of the range.

• We are raising our price target from $26 to $28 based on 12x our FY13 EPS estimate of $2.40.


TRANSPORTATION AND INDUSTRIALS

WestJet Airlines Ltd. | David Tyerman, MBA, 1.416.869.7304 WJA : TSX : C$16.75 | C$2,242.8M | Buy , Target C$27.00 • Correcting annual estimates; maintaining BUY rating and C$27.00 target

Minor calculation change

We are amending our 2012E annual EPS estimate to correct an error such that our quarterly and annual estimates are on the same basis. Our previous annual estimates adjusted net income for changes in the value of derivatives; we believe an unadjusted figure is more comparable to those presented by the company.

No forecast or valuation changes

The change has no impact on our 2013E and beyond forecast or our valuation.

We continue to value WestJet (WJA) using a 5.5x NTM EBITDAR multiple in one year. We continue to believe this multiple is appropriate given WJA’s substantial EPS improvement potential through the economic cycle.

We continue to rate WJA shares a BUY given the strong potential rate of return of 63% to our unchanged one-year target price of C$27.00.

Our 5.5x EV/EBITDAR multiple is a large increase versus WJA’s current near record low level, but we think it is reasonable relative to the company’s historical valuation, sector valuations, and WJA’s prospects.


SUSTAINABILITY

GT Advanced Technologies | Jonathan Dorsheimer, 1.617.371.3875 GTAT : NASDAQ : US$6.14 | US$733.0M | Buy ↑↑↑↑, Target US$9.00 ↑↑↑↑ • Smart phone opportunity feeling closer: upgrading to BUY on potential de-

risking of sapphire backlog; price target to $9


We are upgrading GTAT shares on increased buzz around potential smart phone applications.


• We believe that the smart phone cover “glass” opportunity for sapphire is becoming closer to reality based on our work in the supply chain and GT management’s body language.

• At our growth conference this week, the company directed focus away from its traditional solar and polysilicon businesses toward sapphire and specifically to smart phones, more so than we have seen previously. Clearly this was a major focus of investors given the large potential of this market.

• Conversations within the supply chain at both incumbent sapphire manufacturers and equipment suppliers have hinted at mobile applications for over a year. Lately, these conversations have led us to believe that the major handset manufacturers are getting closer to making a cover application a reality.

• While GT management was very limited in what it could disclose, body language, including the fact that the majority of its webcast presentation revolved around smart phone applications, leads us to believe that a win is a possibility, even if split among a few other suppliers.


LIFE SCIENCES

Perrigo Company | Randall Stanicky, CFA, 212.849.3991 PRGO : NASDAQ : US$108.93 | US$10,272.0M | Hold , Target US$125.00 • F2013 guidance disappoints; maintain HOLD with $125 price target


PRGO reported a generally low-quality quarter with first time fiscal 2013 guidance that found the consensus range but fell short given valuation and expectations which were our two primary concerns that led to our early July downgrade. With that said, we think there is room for upward revisions to guidance throughout the year on what feels like conservative forecasts around new launches and operating margin expansion – both not likely obvious near term. While we continue to like the longer-term Rx to OTC platform and see limited downside risk given the ~7% sell-off today, we think upside is linked to EPS revisions likely to come later in the year with few near-term catalysts to point to absent a transaction – which is still a potential upside driver given PRGO’s past but hard to peg. Remain HOLD rated with $125 price target.

Model update

Post Q4 we have updated our model to reflect newly issued fiscal 2013 guidance. We are lowering EPS estimates (-1% to -4%) through F2015E, although our sales forecasts remain largely unchanged (margin moderation was a focus and the driver of our and likely Street EPS cuts). PRGO provided a large range for initial sales, margin and EPS guidance and as is usual there remains a lot of opportunity for upward revision with M&A likely to remain top of mind. For fiscal 2013-2015E EPS, we are now at $5.46, $6.06 and $6.78.

Valuation

Our $125 price target is derived from an equal-weighted 20.5x P/E and 13.5x EV/EBITDA multiple applied to our forecasts twelve months from now, one year out.


Perrigo Company | Randall Stanicky, CFA, 212.849.3991 PRGO : NASDAQ : US$108.93 | US$10,272.0M | Hold , Target US$125.00 • Post FQ4 -- it's hard to come up with a near-term upside thesis


PRGO reported a generally low-quality quarter with first time fiscal 2013 guidance that found the consensus range but fell short given valuation and expectations which were our two primary concerns that led to our early July downgrade. With that said, we think there is room for upward revisions to guidance throughout the year on what feels like conservative forecasts around new launches and operating margin expansion – both not likely obvious near term. While we continue to like the longer-term Rx to OTC platform and see limited downside risk given the ~7% sell-off today, we think upside is linked to EPS revisions likely to come later in the year with few near-term catalysts to point to absent a transaction – which is still a potential upside driver given PRGO’s past but hard to peg. Remain HOLD rated with $125 price target.

Model update

Post Q4 we have updated our model to reflect newly issued fiscal 2013 guidance. We are lowering EPS estimates (-1% to -4%) through F2015E, although our sales forecasts remain largely unchanged (margin moderation was a focus and the driver of our and likely Street EPS cuts). PRGO provided a large range for initial sales, margin and EPS guidance and as is usual there remains a lot of opportunity for upward revision with M&A likely to remain top of mind. For fiscal 2013-2015E EPS, we are now at $5.46, $6.06 and $6.78.

Valuation

Our $125 price target is derived from an equal-weighted 20.5x P/E and 13.5x EV/EBITDA multiple applied to our forecasts twelve months from now, one year out.


St. Jude Medical | Jason R. Mills, 1.415.229.7166 STJ : NYSE : US$36.87 | US$11,570.7M | Buy , Target US$50.00 • FDA is "Johnny come lately" as usual; maintain BUY


FDA has recommended that patients who have Riata or Riata ST leads undergo chest X-ray to evaluate whether there are abnormalities with the leads’ insulation. However, FDA is not recommending removal of leads, stating that “the majority of Riata and Riata ST leads…continue to function normally and provide life-saving support for patients.” FDA is also requiring STJ to conduct surveillance on Durata ICD leads, which seems a bit impetuous FDA’s part, in our view. While we have not seen evidence that there’s a problem with Durata leads, FDA’s action may have made some investors nervous, leading to the sell-off in STJ shares late yesterday afternoon. We maintain a BUY rating and $50 target.


• Problems with offProblems with offProblems with offProblems with off----thethethethe----market Riata lead are well known.market Riata lead are well known.market Riata lead are well known.market Riata lead are well known. STJ recalled the Riata leads in late 2011. Problems with inside/out abrasion are well documented. We think FDA’s call for imaging studies/further surveillance is neutral to our position on the stock.

• Stock sellStock sellStock sellStock sell----off likely due to lingering concerns about Durata.off likely due to lingering concerns about Durata.off likely due to lingering concerns about Durata.off likely due to lingering concerns about Durata. We surmise investors are concerned about FDA’s requirement for a Durata post-market surveillance study. Our review of >300 records in the MAUDE database showed most Durata events were lead dislodgement. There was a low incidence of external abrasion stemming from friction with another device, connector, or lead – which isn’t the same as “inside-out” abrasion that plagued Riata.

• We see this as an FDA “PR” move.We see this as an FDA “PR” move.We see this as an FDA “PR” move.We see this as an FDA “PR” move. There are ~79K Riata leads still implanted in patients. We believe FDA’s call for X-rays of these patients, along with a post-market study on Durata, have to do with FDA still battling perception issues (stemming from analyses, published in late 2010/early 2011, of its PMA approvals).


MAP Pharmaceuticals | Randall Stanicky, CFA, 212.849.3991 MAPP : NASDAQ : US$13.57 | US$417.0M | Buy , Target US$23.00 • Update at Canaccord Genuity Global Growth Conference


We had both MAPP CEO Tim Nelson and CFO Chris Chai present at our annual Canaccord Global Growth Conference today. We remain bullish on LEVADEX (for acute migraine) and continue to think approval is likely a 1Q 2013 event. MAPP is partnered here with Allergan on the specialist side and plans to find a commercial partner for primary care and RoW, leaving another key catalyst post approval. While stock upside remains linked to approval, we are buyers of the path from here to approval. We reiterate our BUY rating and $23 price target.

• Resubmission of LEVADEX approval remains on trackResubmission of LEVADEX approval remains on trackResubmission of LEVADEX approval remains on trackResubmission of LEVADEX approval remains on track: Resubmit remains on track for late 3Q/early 4Q 2012. We continue to forecast a ~6 month review timeline with approval in late 1Q 2013, though two-month Class I review remains a real possibility.

• FDA clarity from Complete Response Letter helps deFDA clarity from Complete Response Letter helps deFDA clarity from Complete Response Letter helps deFDA clarity from Complete Response Letter helps de----risk approvalrisk approvalrisk approvalrisk approval: With the CRL came no issues around safety or efficacy, and the FDA did not request any additional clinical studies, which we believe points to ultimate approval. MAPP believes it has sufficient clarity around the CMC, inhaler usability and third-party manufacturing issues, which also should not hold up approval.

• AcutAcutAcutAcute migraine market remains large, as does our peak sales forecaste migraine market remains large, as does our peak sales forecaste migraine market remains large, as does our peak sales forecaste migraine market remains large, as does our peak sales forecast: The potential LEVADEX market remains large, and we believe the therapy should see strong uptake on launch. We continue to forecast ~$430 million in US/Canada peak sales for an NPV of $14.50 (on a current $13.57 stock price).

• Upcoming catalystsUpcoming catalystsUpcoming catalystsUpcoming catalysts: Resubmission to FDA and follow-on PDUFA date, potential primary care/RoW partnership, strategic interest in the TEMPO inhaler technology, and follow-on pipeline indications for LEVADEX.


Life Sciences -- Biomedical Devices and Services | Jeffrey Frelick, 617.371.3711 • Key diagnostics takeaways from the 32nd Annual Canaccord Genuity Global

Growth Conference

Eight companies from our coverage universe presented at our 32nd Annual Canaccord Genuity Global Growth Conference in Boston from August 14 to August 16. We highlight key themes across our universe and identify company-specific takeaways in this note.

New product cycles garnering attention

While significant new product cycles are scarce, companies that offer product pipelines with high-value technologies should win. Because product cycles manifest themselves at the top line, we believe investing in diagnostic companies is more about the top line and identifying companies that invest in their product offerings at least every three to five years. Product pipelines are therefore important metrics to consider when analyzing these companies. Diagnostic companies that are embarking on new product cycles include: Alere (ALR), Exact Sciences (EXAS), GenMark (GNMK), OraSure (OSUR) and Quidel (QDEL).

Diagnostics remains hot; driven by strong growth in molecular Dx

Our diagnostics stocks have returned an average of +16% for the year, doubling the return of the Dow Jones Industrial Average (+8%) and outpacing the S&P 500 (+12%). Our molecular Dx names have returned an average of +37% YTD. We estimate that MDx is growing 15% Y/Y and is the fastest-growing segment within the ~$48B IVD market.

Macro drivers

The Q2 earnings season identified some challenges: FX, Europe sluggishness, and longer selling cycles. However, we believe multiple drivers support further diagnostic growth in H2/12 and 2013: 1) regulatory path improving – more CLIA-waived approvals – we saw the first infectious disease test approved for over-the-counter use; 2) utilization appears to have troughed as volumes appear to be improving slightly; 3) IVD industry should see better comparisons this upcoming cold & flu season; 4) hospitals continue to drive outreach programs, which help testing volumes.


Life Sciences -- Biomedical Devices and Services | Jason R. Mills, 1.415.229.7166 • Med-tech: key takeaways from company meetings at our Global Growth

Conference

Canaccord Genuity hosted its 32nd annual Global Growth Conference (GGC) this week in Boston. There was strong investor interest in our medical device names, with strong attendance in company presentations, break-outs and 1x1 meetings. Our quick thoughts on each small-cap med-tech company that presented at GGC are below (descending order by market cap). Notes from presentations and break-out Q&A are in the pages that follow.

• Volcano (VOLC : HOLD)Volcano (VOLC : HOLD)Volcano (VOLC : HOLD)Volcano (VOLC : HOLD) – Clear tailwinds behind FM, solid management execution and GM expansion prospects are marks in the positive column; however, core IVUS faces sluggish underlying PCI trends and more competition (i.e., OCT). Would be constructive on weakness; otherwise would let some time pass before adding to positions.

• HeartWare (HTWR : BUY)HeartWare (HTWR : BUY)HeartWare (HTWR : BUY)HeartWare (HTWR : BUY) – Strong OUS momentum (#1 share), pending HVAD approval, and major progress on next-gen technology (MVAD) keep HTWR as a top pick for us.

• Spectranetics (SPNC : BUY)Spectranetics (SPNC : BUY)Spectranetics (SPNC : BUY)Spectranetics (SPNC : BUY) – Strong tailwinds behind both businesses (VI & LM), crisp management execution, and robust pipeline opportunities not factored into near/medium-term estimates are reasons to continue accumulating SPNC.

• AngioDynamics (ANGO : HOLD)AngioDynamics (ANGO : HOLD)AngioDynamics (ANGO : HOLD)AngioDynamics (ANGO : HOLD) – Stock is off >30% since the controversial Navilyst acquisition was announced. We think management can achieve revenue/cost synergies to which it has guided. At current valuation, we’re warming up to shares.

• Novadaq (NVDQ : Not Rated)Novadaq (NVDQ : Not Rated)Novadaq (NVDQ : Not Rated)Novadaq (NVDQ : Not Rated) – Robust recent results, strong partnerships and impressive pipeline opportunities make NVDQ an interesting small-cap growth story.

• Vascular Solutions (VASC : BUY) Vascular Solutions (VASC : BUY) Vascular Solutions (VASC : BUY) Vascular Solutions (VASC : BUY) – It’s hard to find a small-cap med-tech company with a multi-year track record of double-digit revenue growth, operating margins >15% (and expanding) and trading at an attractive valuation – reasons we rate VASC BUY.

• STAAR Surgical (STAA : BUY)STAAR Surgical (STAA : BUY)STAAR Surgical (STAA : BUY)STAAR Surgical (STAA : BUY) – Sub-par H1 results have clearly weighed on the stock, but we still like prospects for ICL growth and margin expansion. Maintain BUY.

• IMRIS (IMRS : BUY)IMRIS (IMRS : BUY)IMRIS (IMRS : BUY)IMRIS (IMRS : BUY) – Seems IMRS may have turned the corner on bookings trends for VISIUS surgical theatres, and we are bullish about its pipeline (namely robotic system and iCT). Recommend adding to/building positions at current levels.


• Delcath Systems (DCTH : BUY)Delcath Systems (DCTH : BUY)Delcath Systems (DCTH : BUY)Delcath Systems (DCTH : BUY) – Filing its NDA is an important milestone; FDA acceptance (about which we are optimistic) would be a catalyst for shares, in our view.

• LeMaitre Vascular (LMAT : BUYLeMaitre Vascular (LMAT : BUYLeMaitre Vascular (LMAT : BUYLeMaitre Vascular (LMAT : BUY) – Stock is cheap, but somewhat illiquid; company is small, but well managed. Maintain BUY.


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Distribution of Ratings: Global Stock Ratings (as of 3 July 2012)

Coverage UniverseCoverage UniverseCoverage UniverseCoverage Universe IB ClientsIB ClientsIB ClientsIB Clients RatingRatingRatingRating #### %%%% %%%% Buy 590 60.9% 30.5% Speculative Buy 88 9.1% 51.1% Hold 263 27.1% 11.8% Sell 28 2.9% 3.6% 969 100.0%

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BUY:BUY:BUY:BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months. HOLD:HOLD:HOLD:HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months. SELL:SELL:SELL:SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months. NOT RATED:NOT RATED:NOT RATED:NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.

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Risk Qualifier: SPECULATIVE:SPECULATIVE:SPECULATIVE:SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental

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